12 Best Agriculture ETFs To Buy
In this article, we discuss 12 best agriculture ETFs to buy. If you want to skip our discussion in the agriculture industry, head directly to 5 Best Agriculture ETFs To Buy.
A July 2023 report by the Food and Agriculture Organization of the United Nations (FAO) and the Organisation for Economic Co-operation and Development (OECD) predicts that global agricultural and food production will continue to grow over the next decade but at a slower rate compared to the last ten years. This slower growth is attributed to demographic factors. Despite uncertainties like geopolitical tensions, climate issues, and price volatility for agricultural inputs; crops, livestock, and fish production are projected to increase at an average annual rate of 1.1%. Food consumption is expected to rise by 1.3% per year until 2032, indicating an increase in the use of agricultural commodities as food. The projections assume a swift recovery from recent inflation and no key policy changes. However, ongoing inflationary pressures could negatively impact global food demand and production. The report also emphasizes the significance of policies to ensure greater efficiency and food security, especially in light of skyrocketing farming input prices that can burden the poor, who spend a higher proportion of their budget on food.
QU Dongyu, Director-General at FAO, commented:
“The broad trends outlined in this report are heading in the right direction, but need to be accelerated. Promoting a faster shift to sustainable agrifood systems will bring many benefits and help usher in better lives for all, leaving no one behind.”
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Similarly, according to Mathias Cormann, Secretary-General at OECD:
“Surges in agricultural input prices experienced over the last two years have raised concerns about global food security. Investments in innovation, further productivity gains and reductions in the carbon intensity of production are needed to lay the foundation for long-term food security, affordability and sustainability.”
In terms of agricultural commodities, the report by FAO and OECD highlighted some key figures. For example, the demand for cereal production is expected to slow down, mainly because per capita food consumption of most cereals has reached saturation levels in many countries. By 2032, it is estimated that 41% of all cereals will be consumed by humans, 37% will be utilized for animal feeds, and the remaining will be used for biofuels and other industrial purposes. The growth in global crop production will be supported by advancements in plant breeding and a shift towards more efficient production techniques. Moreover, the increase in sugar consumption globally will be mainly attributed to Africa and Asia. On the other hand, high-income countries are likely to experience a continued decline in sugar consumption. Global per capita meat consumption is forecasted to increase by 0.1% per year, largely propelled by middle and lower-income countries. Fish available for food consumption is expected to grow worldwide, with the fastest growth anticipated in Africa. Poultry meat is expected to account for almost half of the increase in total meat production through 2032. Lastly, world milk production is estimated to grow at a rate of 1.5% annually over the next decade, with more than half of the increase coming from India and Pakistan. These two countries together will contribute to almost one-third of global milk output in 2032.
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Hunger and malnourishment continue to be significant issues, distressing more than 800 million people globally. To address this challenge, the global food network must increase food production while using fewer resources like land, energy, and water, in addition to also reducing waste. Consultants at Morgan Stanley recently identified 10 key agriculture tech sectors. The most promising sectors include alternative proteins, resource-efficient seeds, and precision agriculture, offering high growth, compelling risk-reward, and customer benefits, backed by feasible policy initiatives. Agri-food testing, animal health, and organic/naturally healthy food were also ranked well with lower risk and reasonable growth opportunities. However, innovations in crop protection and fertilizers faced skepticism due to sustainability concerns and state policies. Vertical farming and aquaculture were highlighted as potential areas to keep an eye on for future developments. On June 26, Reuters quoted Travis Parman, chief communications officer at startup AppHarvest:
“There is a lot of opportunity with controlled-environment agriculture, because the U.S. is so under-built. It is a way to really de-risk our fresh fruit and vegetable production.”
To benefit from the growth potential in the agriculture industry, investors often gravitate towards stocks like Corteva, Inc. (NYSE:CTVA), Bunge Limited (NYSE:BG), and Archer-Daniels-Midland Company (NYSE:ADM). However, in this article we explore 12 best agriculture ETFs that offer investors the opportunity to invest in the wider agriculture market, including domestic and global stocks, as well as commodity futures.
Our Methodology
We chose ETFs that offer exposure to large-, mid- and small-cap agriculture stocks and agricultural commodity futures to create a well-rounded list of the popular funds. We have also discussed the top holdings of the ETFs to offer better insight to potential investors. These agriculture ETFs have amassed significant gains in the last 5 years. The list is ranked in ascending order of the 5-Year performance as of August 1, 2023.
Photo by Sebastian Gómez on Unsplash
Best Agriculture ETFs To Buy
12. Invesco Agriculture Commodity Strategy No K-1 ETF (NASDAQ:PDBA)
5-Year Share Price Performance as of August 1: 5.64%
Invesco Agriculture Commodity Strategy No K-1 ETF (NASDAQ:PDBA) is an actively managed ETF that seeks long-term capital appreciation. It achieves this by investing in commodity futures and collateral related to the agriculture sector. The ETF’s goal is to outperform the DBIQ Diversified Agriculture Index Excess Return Index, which includes futures contracts of the 11 most actively traded global agricultural commodities. The ETF was established on August 24, 2022, and currently has 15 holdings in its portfolio as of July 28, 2023. It has an expense ratio of 0.62%. The ETF’s top investments are in sugar, cocoa, live cattle, soybeans, wheat, and coffee futures. Invesco Agriculture Commodity Strategy No K-1 ETF (NASDAQ:PDBA) is one of the best agriculture ETFs to invest in.
11. First Trust Indxx Global Agriculture ETF (NASDAQ:FTAG)
5-Year Share Price Performance as of August 1: 8.60%
First Trust Indxx Global Agriculture ETF (NASDAQ:FTAG) aims to match the performance of the Indxx Global Agriculture Index. The fund invests in companies related to the agriculture sector, including farmland companies and firms involved in chemicals and fertilizers, seeds, irrigation equipment, and farm machinery. It was founded on March 11, 2010, and has an expense ratio of 0.70%. Currently, the ETF holds 51 stocks in its portfolio. First Trust Indxx Global Agriculture ETF (NASDAQ:FTAG) is one of the best agriculture ETFs to monitor.
Deere & Company (NYSE:DE) is the largest holding of First Trust Indxx Global Agriculture ETF (NASDAQ:FTAG). Deere & Company (NYSE:DE) is a global manufacturer and distributor of farm and agriculture equipment. The company is divided into four segments – Production and Precision Agriculture, Small Agriculture and Turf, Construction and Forestry, and Financial Services. On May 19, Deere & Company (NYSE:DE) reported its financial results for the quarter ended April 30, 2023. The company announced a GAAP EPS of $9.65 and revenue of $17.39 billion, outperforming Wall Street estimates by $1.01 and $2.52 billion, respectively.
According to Insider Monkey’s first quarter database, 65 hedge funds were bullish on Deere & Company (NYSE:DE), compared to 63 funds in the prior quarter. Bill & Melinda Gates Foundation Trust is the largest stakeholder of the company, with 3.9 million shares worth $1.6 billion.
In addition to Corteva, Inc. (NYSE:CTVA), Bunge Limited (NYSE:BG), and Archer-Daniels-Midland Company (NYSE:ADM), Deere & Company (NYSE:DE) is one of the best agriculture stocks to invest in.
ClearBridge Large Cap Value Strategy made the following comment about Deere & Company (NYSE:DE) in its Q4 2022 investor letter:
“Our industrials holdings produced robust absolute returns for the quarter. While the ISM Manufacturing Index fell in November to contractionary levels, our industrial holdings have largely been able to maintain earnings due to strong competitive positions, historically large backlogs and company-specific drivers. For example, Deere & Company (NYSE:DE) continues to benefit from a strong upgrade cycle as record farmers’ income is driving broad and rapid adoption of the company’s precision agricultural equipment.”
10. Invesco DB Agriculture Fund (NYSE:DBA)
5-Year Share Price Performance as of August 1: 25.07%
Invesco DB Agriculture Fund (NYSE:DBA) aims to mirror the performance of the DBIQ Diversified Agriculture Index Excess Return along with interest income from its holdings of US Treasury securities and money market income. This ETF is intended for investors seeking a cost-effective and convenient means of investing in commodity futures. The ETF was founded on January 5, 2007 and has an expense ratio of 0.91%. The fund invests in futures related to agricultural commodities such as sugar, cocoa, live cattle, soybeans, coffee, wheat, and corn, among others. Based on 5-year performance as of August 1, Invesco DB Agriculture Fund (NYSE:DBA) is one of the best agriculture ETFs to invest in.
9. First Trust Nasdaq Food & Beverage ETF (NASDAQ:FTXG)
5-Year Share Price Performance as of August 1: 34.06%
First Trust Nasdaq Food & Beverage ETF (NASDAQ:FTXG)’s primary objective is to achieve investment results that closely match the price and yield performance of the Nasdaq US Smart Food & Beverage Index. The ETF was launched on September 20, 2016, and has an expense ratio of 0.60% as of August 1, 2023. First Trust Nasdaq Food & Beverage ETF (NASDAQ:FTXG)’s portfolio consists of 30 stocks, and it offers a 30-day SEC yield of 1.76%. It is one of the premier agriculture ETFs to watch.
Archer-Daniels-Midland Company (NYSE:ADM) is one of the top holdings of First Trust Nasdaq Food & Beverage ETF (NASDAQ:FTXG). Archer-Daniels-Midland Company (NYSE:ADM) is engaged in the global procurement, transportation, processing, and trading of agricultural commodities and ingredients. The company operates through three segments – Ag Services and Oilseeds, Carbohydrate Solutions, and Nutrition. On July 25, Archer-Daniels-Midland Company (NYSE:ADM) reported a Q2 non-GAAP EPS of $1.89, beating Wall Street estimates by $0.30. However, revenue for the quarter came in at $25.19 billion, falling short of market consensus by $520 million.
According to Insider Monkey’s first quarter database, 39 hedge funds were bullish on Archer-Daniels-Midland Company (NYSE:ADM), compared to 40 funds in the last quarter. Cliff Asness’ AQR Capital Management is the largest stakeholder of the company, with 1.92 million shares worth $153.2 million.
Here is what Diamond Hill Long-Short Fund has to say about Archer-Daniels-Midland Company (NYSE:ADM) in its Q1 2022 investor letter:
“ADM is a leading agricultural processor that also operates a global nutrition business focused on the development of ingredients and flavors for food and beverages, supplements and more. The company’s recent operating results have benefited (unfortunately) from the war in Ukraine as grain prices and agricultural markets globally experienced strong price increases. ADM is positioned well to benefit from the volatility due to its stable North American agricultural base.”
8. VanEck Agribusiness ETF (NYSE:MOO)
5-Year Share Price Performance as of August 1: 34.75%
VanEck Agribusiness ETF (NYSE:MOO) is one of the best agriculture ETFs to buy. VanEck Agribusiness ETF (NYSE:MOO) aims to replicate the price and yield performance of the MVIS Global Agribusiness Index, which represents companies involved in different sub-sectors of the agricultural industry. This includes agri-chemicals, animal health, fertilizers, seeds, farm machinery, aquaculture, fishing, livestock, cultivation, plantations, and agricultural product trading. The ETF was launched on August 31, 2007, and manages total assets worth $1.16 billion as of July 31, 2023. The expense ratio of VanEck Agribusiness ETF (NYSE:MOO) is 0.53%.
Nutrien Ltd. (NYSE:NTR) is a prominent holding of VanEck Agribusiness ETF (NYSE:MOO). Nutrien Ltd. (NYSE:NTR) is a Canadian provider of crop inputs and services. The company operates through four segments – Retail, Potash, Nitrogen, and Phosphate. On July 24, Wells Fargo analyst Richard Garchitorena upgraded Nutrien Ltd. (NYSE:NTR) to Overweight from Equal Weight and set a price target of $82, up from $62. The analyst said that he views the underperformance of Nutrien Ltd. (NYSE:NTR) stock compared to the chemicals sector as a chance to invest in a top-tier agricultural company with the potential for double-digit organic growth when the market cycle changes.
According to Insider Monkey’s first quarter database, 47 hedge funds were bullish on Nutrien Ltd. (NYSE:NTR), compared to 42 funds in the prior quarter. Jean-Marie Eveillard’s First Eagle Investment Management is the largest stakeholder of the company, with 8.5 million shares worth $629.2 million.
ClearBridge Investments made the following comment about Nutrien Ltd. (NYSE:NTR) in its Q3 2022 investor letter:
“However, we believe this is exactly the kind of environment that separates the highest-quality companies from their peers and allows them to strengthen their competitive positioning. For example, Nutrien Ltd. (NYSE:NTR), a Canadian fertilizer company, was a top contributor during the quarter. While the war in Ukraine and economic sanctions on Russia have significantly reduced the output of two of the world’s largest agricultural producers, Nutrien has benefited from a strong global agricultural cycle and from farmers seeking to increase their output and capitalize on higher agricultural prices.”
7. Teucrium Corn Fund (NYSE:CORN)
5-Year Share Price Performance as of August 1: 35.46%
Teucrium Corn Fund (NYSE:CORN) offers investors a convenient way to participate in corn futures prices from a brokerage account. Due to its historically low correlation with US equities, the ETF may be a smart choice for diversifying investment portfolios. As of August 1, 2023, Teucrium Corn Fund (NYSE:CORN)’s net assets stand at $105.7 million, and it has an expense ratio of 0.20%. Teucrium Corn Fund (NYSE:CORN) was established on June 9, 2010. It is one of the best agriculture ETFs to invest in.
6. Invesco Dynamic Food & Beverage ETF (NYSE:PBJ)
5-Year Share Price Performance as of August 1: 38.86%
Invesco Dynamic Food & Beverage ETF (NYSE:PBJ) tracks the Dynamic Food & Beverage Intellidex Index, which includes 30 American companies involved in the production, sale, and distribution of food and beverage products, agricultural products, and new food technologies. The ETF was established on June 23, 2005, and currently holds 32 stocks in its portfolio. It has a total expense ratio of 0.63% and a 30-day SEC yield of 1.39% as of July 31, 2023.
Adecoagro S.A. (NYSE:AGRO) is an agro-industrial company in South America. The company is engaged in multiple agricultural activities, including farming crops, rice, grains, oilseeds, and fibers such as wheat, corn, soybeans, peanuts, cotton, and sunflowers. In the first quarter of 2023, Adecoagro S.A. (NYSE:AGRO) reported an adjusted EBITDA of $89.2 million, representing a 3.1% increase compared to the last year. This growth was driven by the strong performance of the Sugar, Ethanol & Energy business, which compensated for the decline in the Farming division, especially in Crops due to challenging weather conditions and higher costs. Additionally, the company's adjusted net income for Q1 2023 was $38.9 million, marking a significant improvement of $24.2 million from the previous year.
According to Insider Monkey’s first quarter database, 11 hedge funds were bullish on Adecoagro S.A. (NYSE:AGRO), compared to 7 funds in the prior quarter. William Duhamel’s Route One Investment Company is the biggest position holder in the company, with 13 million shares worth $105.5 million.
Like Corteva, Inc. (NYSE:CTVA), Bunge Limited (NYSE:BG), and Archer-Daniels-Midland Company (NYSE:ADM), Adecoagro S.A. (NYSE:AGRO) is one of the top agriculture stocks to watch.
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Disclosure: None. 12 Best Agriculture ETFs To Buy is originally published on Insider Monkey.
